Price management tweaks urged for petrol retailers

At last week’s session of the National Assembly Economic Committee on the petroleum market, Giang Chan Tay, director of petrol retailer Boi Ngoc Co., Ltd. in the Mekong Delta province of Tra Vinh, claimed that many businesses had suffered losses over the last year, with retailers no longer receiving discounts.

Vietnam's petrol and oil imports increased sharply in the first two months of 2023, reaching 1.7 billion USD. (Photo: VNA)

He said the standard profit on petroleum was VND300 (1.3 US cents) per litre, which was the foundation for wholesale businesses to calculate and define discounts for retail deliveries. If wholesale businesses were struggling with losses, they would reduce discounts for retailers.

“The retail businesses need a 5-6 per cent discount from the buying prices to cover operating costs, staff salaries, bank interest, and shop rents. We cannot suffer losses, whenever the market becomes unstable again,” said Tay.

Another representative of a retail business in the northern province of Ha Giang said it was necessary to reposition their role. Their estimated loss over the past year was as much as $174 million because of shortcomings in the price management mechanism.

“The upcoming amendment to the decree on petroleum should clearly define the position of retail businesses to design appropriate policies,” he said.

Dau Anh Tuan, legal head and deputy general secretary of the Vietnam Chamber of Commerce and Industry (VCCI), acknowledged that discounts should not be floating in the petroleum supply chain.

“The state should still price items when amending Decree No.95/2021/ND-CP on petrol and oil trading, and it is necessary to rationally calculate the structure in the base price of petrol, and the minimum discount rate for retailers so that they will not suffer losses,” said Tuan.

Nguyen Dinh Cung, former director general of the Central Institute for Economic Management, suggested immediately solving the short-term problems, so that the retail businesses do not suffer. “Retail is the most important part of the petroleum supply chain, it must be maintained and developed. We cannot let this link wear out,” said Cung.

A representative of the National Assembly Committee of Science, Technology, and Environment said the market picture has been unstable since Decree 95 took effect at the start of 2022, and wondered if an upcoming amendment to the decree would solve the current inadequacies.

“It does not correctly calculate the costs constituting the base price and does not ensure the harmonisation in benefits for wholesalers, distributors, and retailers. So retailers who manage the direct output of the petroleum market have been suffering from continuous losses for more than a year,” the representative said.

Minister of Finance Ho Duc Phoc said recent efforts in oil and gas management of the Ministry of Finance (MoF) and Ministry of Industry and Trade ensured compliance with regulations.

For example, the cost of importing petrol to Vietnamese ports and the cost of transporting it from domestic refineries to the port are reviewed by the MoF every six months, or when there are unusual fluctuations. “The standard business expenses and the normal profit are determined annually by the MoF to calculate petrol and oil prices,” said the minister.

He explained that petrol prices were determined by market prices, including production and import prices, and base prices. “The retail price to the market must not exceed the base price and the selling price in remote areas must not exceed 2 per cent of the base price,” Phoc said.

In 2022, the total supply of petroleum was nearly 25.6 million cubic tonnes, including 8.87 million from imports, and nearly 15.7 million (66 per cent of demand) from domestic production at Nghi Son and Dung Quat oil refineries. “If these two supply sources are stable and well managed, the petroleum supply will not be disrupted, and prices will not change too much,” the minister said.

In addition to the management of the state, Anh Tuan from the VCCI said that Vietnam’s petroleum retail system lagged far behind other countries. He said that petrol stations in Vietnam must develop into investment-capitalised convenience stores with long-term development prospects.

“It is necessary to improve market discipline by issuing electronic invoices in petrol and oil trading to manage output and input, so the use of smuggled petrol or unknown-origin petrol will be much more limited,” Tuan said, adding, “It is also necessary to apply competition law to manage businesses and prevent price fixing.”

Petrol and oil imports increased until end of June 2023 Due to the fluctuations in the global energy market that could last until next year, the Ministry of Industry and Trade (MoIT) is making efforts to ensure the supply of petroleum products in the domestic market.

Petrol retailers rue continuing hardship Petrol retail enterprises have struggled to keep their operations profitable as disruptions in the supply chain continue to persist.